The festive season is upon us. No matter your culture or creed, it’s a season of sharing, celebrating, and giving. So, in the spirit of generosity, what are you gifting South Africa these holidays?
Your money matters. It matters to you, and what it does while it’s working for you matters to all South Africans. As one of the most unequal countries in the world, how are we as a people literally investing in each other and our environment?
The current local investment climate is hard, and many a financial advisor will tell you not to invest on your home turf right now. However, if you do invest domestically, why not also invest in South Africa.
You might not know that you have options for investing your savings, retirement funds, and investments in South Africa’s future, while still protecting your returns.
Sustainable investing and impact investing, a practice that sees investors intentionally put their money into companies that are creating a positive impact on society and the planet, is growing rapidly. Although South Africa doesn’t have financial institutions dedicated to sustainability just yet, there are multiple ways to start aligning your money with your values, and letting your wealth walk the talk.
How to make your money walk your talk?
Whether you’re a first timer, experienced investor, or high-net worth individual, the first step is engaging directly with your financial advisor, asset manager, bank, employer, or the organisation managing your retirement fund. Ask where your money is actually being invested, and request specific options to invest sustainably.
With more attention and more demand comes more options for sustainable impact investing. South African investors’ interest in sustainable investing is already encouraging financial service providers to design sustainable solutions. For example, Old Mutual has launched two index feeder funds focused on companies with high Environmental, Social and Governance (ESG) performance relative to their peers.
If your financial service provider or advisor doesn’t have an immediate impact investing option at hand, keep asking – that’s how the market evolves. By recognising the role of your voice in the market, the financial sector is nudged towards finding more options and creating better choices for sustainable impact investment.
Choose an innovative investment option
Until impact investing becomes mainstream in South Africa, you might have to look for more innovative options outside of your day-to-day investment routes. While this is also a nascent industry in South Africa compared to countries such as the UK and the Netherlands, opportunities are starting to emerge.
Sun Exchange, for example, allows you to invest in solar energy by purchasing solar cells for as little as R50 per cell. These solar cells are leased to a project such as schools, retirement villages, and businesses. When the solar cells start generating revenue, you receive returns on your investment - both financial returns and impact returns. Similarly, FedGroup’s Impact Farming app offers the opportunity to invest in solar, as well as honey and blueberries. In addition, this pioneering app allows you to monitor the impact of your investment, including CO2 emissions saved, job hours created, water saved, and light bulbs powered.
EasyEquities is another accessible platform that allows individual investors to buy shares, ETFs, and bundles with no minimum investment and low fees. The platform itself is not focused on sustainable investing, but does allow you to put your money in companies or indices that you believe make the world a better place. In addition to the South African market, EasyEquities offers a USD account with access to companies such as Beyond Meat - which addresses the impact areas of health, climate change, natural resources, and animal welfare, by developing innovative plant-based alternatives to animal products.
Dive right in with a direct impact investment option
If you’re keen to get your hands dirty, there are also multiple ways of investing directly in high-impact early stage ventures working to make South Africa more inclusive and sustainable.
Online matching platforms such as Angel Investment Network and RainFin allow individual investors to provide loans to small businesses, and Uprise.Africa offers equity deals of a similar size. While not all of these deals are impact-focused, it’s a great starting point to find enterprises that align with your ethical values.
For High Net Worth Individuals (HNWIs) and angel investors wanting to invest locally in South Africa’s socio-economic development, there are angel investing networks such as Jozi Angels. There are also networks and courses designed just for HNWIs wanting to engage with impact investing; these include PYMWYMIC, TONIIC, the Centre for Sustainable Finance and Private Wealth at the University of Zurich and, of course, the Bertha Centre for Social Innovation at the UCT Graduate School of Business.
Across South Africa, many social entrepreneurs are hard at work making your immediate community and city more sustainable, more equal, and more inclusive. Take, for example Lumkani, a social enterprise that is working to address the challenge of fires in urban informal settlements in South Africa and across the globe by using innovative early-warning systems together with low-cost inclusive insurance products to provide safety and financial security to their clients. Other great examples on our doorstep are Silulo Ulutho Technologies, a one-stop IT company that provides public computer courses accredited by MICT SET, or Technovera - Pelebox, a social impact startup focused on technology inclusion with the aim of improving the last mile for chronic medication access in Africa. Pelebox is a smart locker system that enables patients to collect their chronic medication in under two minutes instead of queuing for hours at public clinics.
All of these social enterprises have demonstrated scalability, however, they need investment to continue to grow. Pioneering early-stage investors have shown that this can be done sustainably and impactfully.
But what about financial returns?
Of course, the discussion around sustainable investing wouldn’t be complete without addressing the elephant in the room: financial returns. Although the festive season is undoubtedly a time of giving, sustainable and impact investing don’t need to mean a trade-off in financial returns. In fact, research shows that investments taking environmental, social, and governance considerations into account generally perform better than the benchmark.
That’s not to say that sustainable investing is a golden-paved road to riches. Direct investments are risky, and if you want to have on-the-ground impact you may instead choose to take a cut on your financial returns early on to support long-term growth of the business. Whichever you choose, you can rest assured that money is supporting tangible value for the economy, communities, and the planet.
Keen to get started? You’re not alone. The number of South African investors investing in funds that consider and report on sustainability is 13% higher than the global average.
With devastating inequality and the effects of climate change banging on our door, there has never been a better time to put your money where your heart is.
Natasha Dinham, Fergus Turner, Tine Fisker Henriksen are all from the Bertha Centre for Social Innovation at the UCT Graduate School of Business.